Schwab Limits Exposure While Fidelity Raises Costs on Long-Short SMAs
Major custodians Charles Schwab and Fidelity have implemented significant policy changes regarding long-short separately managed accounts (SMAs), prompting Registered Investment Advisors (RIAs) to reassess their strategies. Fidelity increased financing rates for these strategies by nearly 90 basis points, raising them from 60 to 152 basis points, and halted new account openings in February. In response, Falcon Wealth Planning, a California-based RIA, moved all its long-short SMA client assets from Fidelity to Schwab. Conversely, Schwab introduced a cap limiting long-short strategy allocations to 30% of an RIA’s assets under management to ensure responsible growth. Industry experts attribute these moves to differing operational structures; Schwab, as a bank, exercises direct control over risk exposure, while Fidelity relies on external banking partners. The changes primarily impact wealthy clients seeking tax-efficient strategies to offset capital gains from events like business sales. Despite the restrictions, advisors note that most clients remain well below Schwab’s new threshold. Both firms emphasize their commitment to supporting long-short SMAs while managing platform resources and risk effectively amidst surging demand.
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Schwab Limits Exposure While Fidelity Raises Costs on Long-Short SMAs
Major custodians Charles Schwab and Fidelity have implemented significant policy changes regarding long-short separately managed accounts (SMAs), prompting Registered Investment Advisors (RIAs) to reassess their strategies. Fidelity increased financing rates for these strategies by nearly 90 basis points, raising them from 60 to 152 basis points, and halted new account openings in February. In response, Falcon Wealth Planning, a California-based RIA, moved all its long-short SMA client assets from Fidelity to Schwab. Conversely, Schwab introduced a cap limiting long-short strategy allocations to 30% of an RIA’s assets under management to ensure responsible growth. Industry experts attribute these moves to differing operational structures; Schwab, as a bank, exercises direct control over risk exposure, while Fidelity relies on external banking partners. The changes primarily impact wealthy clients seeking tax-efficient strategies to offset capital gains from events like business sales. Despite the restrictions, advisors note that most clients remain well below Schwab’s new threshold. Both firms emphasize their commitment to supporting long-short SMAs while managing platform resources and risk effectively amidst surging demand.
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